The author is a Forbes contributor. The opinions expressed are those of the writer.

Loading ...

Loading ...

This story appears in the {{article.article.magazine.pretty_date}} issue of {{article.article.magazine.pubName}}. Subscribe

(Kitco News) - (New York) – Silver’s struggle to hold gains could be a bad indication for the gold market as the white metal fails to keep pace, said the director of research for ETF Securities.

“The key thing I am watching now is silver, all precious metals have positive correlations to each other, they are not very high - but the highest is silver and gold,” said Michael McGlone, director of research for ETF Securities in an interview with Kitco News.

“It is very rare for one to zig and the other to zag,” he explained.

With gold prices rising 9% this year, silver has been stuck at the $20 dollar level for the past three to four weeks, its 20 -day volatility has dropped to the lowest level since its big plunge last year, he said.

“My fear is if silver goes down it will be a bad indication for gold,” McGlone said.

“I have been waiting for silver to catch up to the party and am worried if it doesn’t, it’s a risk to the party,” McGlone said.

Silver prices have traded sideways and choppy for three weeks; as of 12:56 p.m. EDT, spot silver was at $19.5720 an ounce.

ETF Securities recently reported that more money flowed into silver exchange-traded products than any other commodity during the first quarter, enabling commodity ETPs as a whole to post their first net inflow since the fourth quarter of 2012.

“There has been a decline in gold ETF holdings but there has still been an accumulation in silver, platinum and palladium,” McGlone said.

As for gold, McGlone says he believes it bottomed at $1200 and senses there is still substantial demand.

“I saw a little bit of backwardation earlier in the week and the forward rates are all negative – these are signs of substantial demand that indicate prices could go higher,” said McGlone.

McGlone said many anticipated gold would go down with the U.S. Fed taper program nearing an end, but it has been the opposite.

“At the end of last year the global consensus at all these wealth manager conferences I attended was; the dollar will be stronger, interest rates are going to go up, stocks will continue to do well and by the way, gold should continue to go down,” McGlone said.

“We are basically in the second week of Q2, and it has been the opposite. At some point this fade to consensus trend has become the trend. Meaning gold is improving,” he added.